Why do people use Fibonacci in trading?

At the end of the day its just a tool to map the market. It's wrong to think in terms of does it work or not. It all depends on how you use it in your strategy, how you see the market. The significance of it is, is that whichever fib tool you use, it can be made made repeatable and standardised.

I do not use it but I believe it does have some use. Firstly, because it is self-fulfilling, many people use it -(so you could use it against them). Secondly, it could be a psychological gauge of the market - hence the significance of the non-fib 50% level. Beyond 50% retracement of a swing, the masses might start to no longer think short but long simply because the market no longer looks short (and vice versa)- Their thinking is, if they wait any longer they might miss the move back up to the top of the swing. This additional liquidity attracts more informed traders to sell into these panick buyers and the market begins to turn back down. At 61.8% this panick buying may seemingly be more urgent for the masses who think they'll miss the move up.

Given that the forex market is very chart orientated to both professional and amateaur retail traders, an interesting study would be to see if the clearer the swing retracement the more defined/accurate the turning points are at fib ratios, both in terms of the self-fullfilling mechanism and because panick buyers/sellers see the market structure more clearly and hence get more emotionally involved more easily. Food for thought.

listen if Fibs just like other indicators worked so great, im sure every trader would be using them. i can make up a set of numbers and plug it my chart and ill find a way to make it work. If you want something to work, your mind will make it work even if it doesnt make any sense. So fibs and all other useless indicators works if the trader believe they do. yes Fibs has nothing to do with forex market. Ill start using Fibs and indicators when mega forex traders like Soros come out and say that's all they use. untill then ill just trade price.

Fib levels do not "work". A good trader, however, will learn how to make trade decisions using fibs. Here is an example of how I have been making fibs work for my trading. The following is a 4H chart, E/$. Place stops just above the .786 and wait for your targets to be hit: {image}

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I was just showing how I use the fib tool in trading (just one of many that I use every day). It doesn't work by itself. Like all trading tools, it requires a trader to understand how and when to use the tool. If you want to learn how a specific tools can be used in trading, there are plenty of traders around FF who can help you.

If you can "make up a set of numbers and plug it my chart and ill find a way to make it work", then do it, and come back after being successful with it for 6 years. I'd be interested in seeing what ya come up with.

Based on the other posts in this thread, there are plenty of "aspiring traders" who can share their failures with this tool, and other tools, as well. Spend you time in any manner you wish.

If is fibo or if is any other tool/indicator, is not that what matters. (In this particular case is fibo).

The problem is.

Lack of knowledge and dedication is a major cause of failure not only in forex as in life.
And worse is that those who do not have the minimum knowledge and dedication, or are not interested in having, but they always give opinion on the matter.

Just another example of how fib's "don't work" where I foolishly put 60 pips in the bank this morning in E/$ trades. In addition, more fib foolishness on other pairs this morning, but I will spare you all the details and use this to get the message across. If you know how to use 'em, they are among the most profitable tools you can learn to use.

Here is another trade from this mornings action. This was another example of how fibs don't work and that it's foolish to use them. Here's my advice to anyone who is still paying attention to this thread: find a set of tools that works for you and master their usage. Good trading to all!

Here is another trade from this mornings action. This was another example of how fibs don't work and that it's foolish to use them. Here's my advice to anyone who is still paying attention to this thread: find a set of tools that works for you and master their usage. Good trading to all! {image}

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Well, yes, it appears to work in your examples. Anyone can find such cherry picked examples, and examples where it does not work. That argument is pointless. Trading is not a mathematical excercise. The issue here, as with any technique or tool is, 1. how you personally use it,. but more crucially 2. WHAT IS YOUR INTERPRETATION OF ITS LOGIC AS A MARKET TOOL?

You cannot have a discussion as to whether something works or not in the market, without thinking about the logic of such a tool and how you percieve the market works in context. FF is full of such mindless crappy discussions. (Note to noobs - find those discussions where the logic of the market is discussed, you will learn and understand a whole lot better).

Well 1) It is an elegant system of explaining many of the phenomenons observed in nature and since trading is an aggregate of human activites so it makes sense to use Fibonacci to explain the changes observed in the market

2) Since it's so widely used in the financial market so now it's become a self-fulfilling prophecy

But I find the trick is knowing which level and on which timeframe is the fibonacci being used by the Market so you can trade with it and not against it.

Slim, I looked at your charts. My trading charts have pivot points on them, too, and I use them for targets, not entry or trade set up. From your charts, it is not clear to me where you are entering and exiting your trades. Could you point that out for me? Thanks.

My personal opinion of Fibonacci ratios in financial markets is that they're the trading equivalent to astrology.

Considering how much information exists about their usage, they don't have any real mathematical significance or scientific backing for usage in financial markets and they don't subliminally control traders... it's human beings who move the markets and place trades, not nature.

The fact is people have their own interpretation of the market, this makes level drawing very subjective and down to the individual traders opinion on what a swing high/low is and where they exist... not to mention each broker has their own price feed which makes the chances of your levels being identical to others interpretations unlikely. Still certain of the accuracy of your ratios?

I will admit that due to how well fib ratios are marketed and how intriguing they are to traders... with enough sheep following, there is an argument that the levels can become self-fulfilling prophecies when enough people place a concentration of the same bias orders around the same zone. I still don't think this is a valid reason to trade fibs when then underlying reasoning is flawed.

People will always want ways to predict the unpredictable... and what better way than the hidden ratios of mother earth and her lovely shells?

Well 1) It is an elegant system of explaining many of the phenomenons observed in nature

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which are r3ally not true ??Sometimes the authors who write "gee-whiz" science books for the layman engage in "Fibonacci fakery". We cite a few examples. Rather poor agreement. Nautilus shells. Consider the commonly seen assertion that shells of the Chambered Nautilus conform to the golden spiral. The photo on the right shows one that has been sawed carefully to show the inner chambers. For comparison, the actual golden spiral is shown on the left. Clearly this creature hadn't read the books! If these two were superimposed they wouldn't match no matter how they were scaled or aligned.

to explain the changes observed in the market 2) Since it's so widely used in the financial market so now it's become a self-fulfilling prophecy But I find the trick is knowing which level and on which timeframe is the fibonacci being used by the Market so you can trade with it and not against it.

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Since I was a small child I remember the fanatics saying that the World was about to end.
They still say it today. Of course it's a self-fulling prophecy. The World may end tomorrow
or in a few billion years.

And as you said... the "trick" is knowing where or which timeframe to use the fib(er)

Seems that you can put it almost anywhere and it will mean something
(which is really nothing)

Well, yes, it appears to work in your examples. Anyone can find such cherry picked examples, and examples where it does not work. That argument is pointless. Trading is not a mathematical excercise. The issue here, as with any technique or tool is, 1. how you personally use it,. but more crucially 2. WHAT IS YOUR INTERPRETATION OF ITS LOGIC AS A MARKET TOOL? You cannot have a discussion as to whether something works or not in the market, without thinking about the logic of such a tool and how you percieve the market works in context. FF is full...

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My examples are trades, not cherry picking. Of course, I could show about 100 fib set ups from today that did not work, and should be avoided for trading, because they are not trades. The key is knowing which ones can/should be traded. I have provided the examples to show how I use fibs, and in addition, have posted lots more trades in my trading journal here on FF. And yes, there is very specific logic behind the use of fibs (and the other tools I use), based on my work as a consultant to currency and bond trading operations, in my pre-trading life, and years of trading experience since then. A little of that is explained or described in my journal.

As for noobs, spend less time listening to the FF experts who "know" what doesn't work, and instead focus on how the tools you have at your disposal can help you figure out market structure. Focus there, not on what George Soros thinks or what Tom Demark is doing. These guys take on positions with an eye on holding them for months, while retail traders are trying to figure out what the next 4H candle will look like. Besides, what these two mopes are doing does not matter in your trading. The only thing that matters is what the banks are doing, and unless you fully understand them, retail trading is really difficult, and most of what you see in your charts will seem like random chaos. Like I said in my first post, fibs don't work, but I make them work for me. The same can be said about support/resistance, trend lines, etc.

Finally, I do not consider myself a trading expert, nor am I a big shot, nor am I offering anyone help. I belong to a trading group that consists of experts, and I know for a fact that I am not one of them! Good trading to everyone.

then one can determine the true value of such calculated static levels.

regardless of were one conjures mathematical static fixed points they will always have a positive outcome for some and equally a negative outcome for others, dependent upon your present cycle of win to loss,

but if one can understand porkpies point you may well turn such calculated levels to ones advantage.